HMO Accused of Underpaying Doctors

By Phil Galewitz, AP Business Writer
March 16, 2000

NEW YORK (AP) - The American Medical Association has filed a class-action lawsuit against HMO giant United Healthcare Corp. for reducing payments to thousands of New York doctors by using invalid data to determine reimbursement rates.

As a result, patients have been forced to pay higher doctors bills to make up the difference, the AMA says.

The civil suit, filed Wednesday in state court in Manhattan, seeks unspecified compensation, including punitive damages.

AMA Trustee Dr. Donald Palmisano said the physician's group believes the problem of HMOs underpaying doctors is happening nationwide with several major health maintenance organizations. 'Insurance companies play by their own rules without regard to patients or the legitimate cost it takes to care for them,' he said.

Many insurance company contracts let them pay doctors using the lowest amount based on three factors: the doctor's actual charge; what the doctor usually charges; and the 'reasonable and customary charge,' which is determined by what other doctors in the same specialty in the same city charge for the service.

In the lawsuit, the AMA says United relied on data provided by the insurance trade group the Health Insurance Association of America to establish the ``usual'' charge for services. The AMA says the data is invalid.

The suit against United is the second time the AMA has sued a large HMO in as many months. In February, the AMA sued Aetna Inc. (NYSE:AET - news) in Georgia for failing to pay doctors promptly.

Palmisano, a New Orleans surgeon, said the recent suits are part of the AMA's new strategy of getting more aggressive in pursuing physicians' rights against HMOs.

United Healthcare officials did not return calls seeking a comment.

Last year, United won praise from the medical community after it said it would no longer overrule doctors seeking approval for certain tests, treatments or hospitalizations.